TOPICS

Rural Finance

SOLUTION TYPE

Innovation (technical or institutional), Technology

REGION

Asia and the Pacific

"By doing e-commerce, we can build a career while taking good care of our children and family. This is our biggest dream."

Aihua Jiang, E-commerce entrepreneur

BACKGROUND

Most rural areas in China do not have the conditions for rapid agricultural modernization, industrialization or urbanization. As a consequence, the family-based small farmer production model in these areas has limited market opportunities. With the development of E-commerce, online sale of agricultural products is creating new value chains and improving livelihoods.

WHAT’S INVOLVED

Internet platform

The online sale of agricultural products reduces both transaction cost and processes, enabling the development of agricultural e-commerce, which increases rural employment and entrepreneurship.
 

Village entrepreneurship

With new possibilities for storage, sale and transportation, local farmers can transform agricultural resources and products into economic opportunities.
 

Government support

Local authorities provide tailored support to villagers including technical training and facility development such as industrial parks.
 

Inclusive growth and empowerment

Rural e-commerce benefits young and talented people including women, many becoming leaders and role models in their community.

EXPLORE THIS SOLUTION

Agro-Taobao offers:

  • The development of e-commerce and entrepreneurship by facilitating online agricultural sales;
  • Youth and women empowerement with easier access market;
  • The promotion of local know-how by advertising at an international level historical products.

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Countries involved

China

Project partners

Shuyang Government, Alibaba Group

Project dates

2000 -Present

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Summary

E-commerce promotes sales of agricultural products through the Internet platform, reduces transaction costs and simplifies the transaction process. In Shuyang, villagers can sell, store and transport agricultural products without leaving the village, which increases rural employment and entrepreneurial opportunities and transforms local agricultural resources and product advantages into economic opportunities. Grassroots entrepreneurs, main products, infrastructure development and government supports are the four core factors that affect the development of agricultural e-commerce in Shuyang.

 

Challenge/Problem

In 2017, the rural population in China reached 580 million. With limited arable land resources, the human-land relation is very tense. Most rural areas in China do not have the conditions for rapid agricultural modernization, industrialization or urbanization, and the gap in income and infrastructural development between rural and urban areas is expanding. As a consequence, the massive rural-to-urban migration since the 1990s further exacerbated rural hollowing, marginalization of agriculture and the aging of farmers. As a poverty county of Jiangsu Province, Shuyang also experienced these socio-economic problems.

Shuyang, known as the “County of Flowers and Trees”, has over 400 years of history of gardening. The local horticultural industry was “small scale” and “highly dispersed”. The family-based small farmer production model focuses on production rather than other links in the value chain. The high market instability, high agricultural production costs, low-profit margins, low added value, land pollution and degradation, together resulted in the disadvantaged position of agricultural products in market competition.

 

Solution 

In the process of rural e-commerce development, Alibaba's Taobao has become the main platform for farmers to participate in e-commerce. People used to call those villages with high participation in e-commerce as “Taobao Village”[1]. Agro-Taobao Village refers to a Taobao village in which the main products are the primary or processed products of agriculture, forestry, animal husbandry and fishery. The development of Shuyang agricultural e-commerce relies on four core factors:

  • Village entrepreneurship 

In Shuyang, farmers started to sell plants online in early 2000, then their neighbours or relatives learnt from their experiences and started similar businesses. Gradually, new job opportunities arose, including graphic design, photography, express delivery services, goods storage, IT techniques, etc.

  • Featured agricultural product

The horticulture industry in Shuyang has a history of more than 400 years. Located in the North-South climate transition zone, Shuyang gradually developed the featured plantation industries including bonsai, dried flowers and succulents.

  • Supporting facilities

Shuyang government focused on promoting transportation, internet, and express delivery, to support the development of e-commerce. With China’s increasing investment in agriculture, the construction of infrastructure in rural areas has been significantly improved. The rapid growth of the mobile Internet has further amplified the comprehensive utility of infrastructural facilities.

  • Government guidance

Shuyang government provided tailored support to villagers, including technical training, assistance in online store registration, entrepreneurial loans, business skills, etc..Industrial parks were established to promote the cluster upgrade and establish the e-commerce ecosystem.

 

Results

  • Rural e-commerce has developed rapidly. The online sales of agricultural products in rural areas in China reached 230.5 billion yuan in 2018, with an increase of 33.8% year-on-year.
  • The number of Taobao Villages in China increased from 212 in 2014 to 2,118 in 2017 and to 3,202 in 2018. The number of Taobao Towns, defined as town or districts with more than three Taobao Villages, increased from 17 in 2014 to 242 in 2017, and to 363 in 2018.
  • Women also benefit from e-commerce. The ratio of women to men entrepreneurs in e-commerce is at or near parity, compared to a ratio of 1:3 in traditional businesses. The average age of female entrepreneurs tend to be younger in e-commerce, with those aged 25–29 accounting for 30% and those aged 18–24 nearly 30% on the Taobao platform. The average age of online female entrepreneurs is 31.4.
  • Rural e-commerce can contribute to inclusive growth. Many young and talented people, including women, returned to hometown, earning income similar to or higher than they were as migrant workers in the cities, while enjoying family life with their elderly and children. Many have become leaders of e-commerce and role models for their fellow villagers.

 

Lessons Learned/Potential for replication

  1. Develop with local industrial base and resource endowment. The natural and geographical conditions of a country and region are important factors affecting the market and closely related to business activities. A considerable part of products from the Taobao Village, where the agricultural industry foundation is the economic pillar of regional development, is local featured agricultural products.
  1. Mature e-commerce platform. An important reason for the rise of Taobao Village in China is the inclusiveness of Taobao.com, which provides equal opportunities for villagers to participate in entrepreneurship, in order to improve their economic and social welfare. Diversified consumer preferences create numerous market segmentation opportunities for rural e-commerce.
  1. Infrastructure and logistics. In addition to the traditional characteristic industry foundation, the formation of agricultural Taobao Village also requires certain infrastructure and industry support, including convenient traffic, communication facilities and logistics.

 

Next Steps

The experience in China proves that e-commerce has the potential to help support poverty alleviation, but developing it requires much more than connecting people to the internet. Infrastructure and logistics, entrepreneurship and skills, suitable local products, and a conducive environment are crucial. China’s experience shows targeted support to improve skills and entrepreneurship, lower entry barriers and an improved business environment, and measures to address information asymmetries between producers and consumers and allow new entrants to participate in online markets, can help to launch e-commerce also in less advantaged areas.


[1] Defined by AliResearch as administrative village with e-tailers clustering and total annual e-commerce transaction volume of more than RMB 10 million (about US$1.5 million), as well as at least 10 percent of village households actively engaging in e-commerce or at least 100 active online shops operated by villagers, primarily with the use of Taobao.com and Tmall.com marketplace.

Solution Video

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Video Author: IFAD TV

Video Resolution:1280 x 720

Last update: 20/10/2020